The UK Competition and Markets Authority (CMA) has given provisional regulatory approval for the proposed merger between Virgin Media and O2.
Last November, the European Commission — which retained oversight of the transaction before the UK left the EU — referred the merger to the CMA for review.
Andrea Coscelli, Chief Executive of the CMA, said at the time that these markets are important and evolving, and that the deal required careful examination to ensure consumer protection. The CMA indicated it would build on the Commission’s initial work to investigate the case thoroughly and efficiently.
Today’s provisional clearance means a newly merged Virgin and O2 would be better positioned to compete with BT and EE — currently the UK’s largest providers of broadband and mobile services respectively — who themselves formed a major combination in 2016 that was subject to intense regulatory scrutiny.
Kester Mann, Director of Consumer and Connectivity at CCS Insight, described this as a transformative merger for the UK telecoms sector. He said the combined company would become a strong converged provider to rival BT, accelerating the trend toward bundled fixed-line and mobile offerings. Mann noted the merged group will likely market services under both the Virgin and O2 brands to increase customer retention and spend, while also needing significant investment to expand cable and 5G infrastructure across the UK. He added the joint venture will face strategic decisions about brand direction as they fund network expansion.
During its review, the CMA considered whether the merged company could raise prices, reduce quality, or withdraw wholesale backhaul services that it supplies to rival mobile operators such as Vodafone and Three. The CMA’s concern was that higher wholesale costs could ultimately be passed through to consumers.
An independent panel of CMA members found, however, that those risks were limited for several reasons:
- Backhaul costs represent only a relatively small portion of rival mobile operators’ total costs, so a unilateral increase is unlikely to translate into higher retail prices for customers.
- Other providers supply leased-line services across the UK, notably BT Openreach, which has a much broader geographic reach than Virgin, along with several smaller competitors. This competitive supply base means the merged firm would still need to keep its wholesale services competitively priced or risk losing business.
- Similarly, other companies supply mobile network access to telecoms firms, so O2 will face wholesale competition and must remain competitive to retain that business.
Martin Coleman, Chair of the CMA’s inquiry panel, said the authority carried out a close and comprehensive assessment given the potential impact of the deal. He stated that the phase 2 analysis shows the merger is unlikely to lead to higher prices or poorer mobile service quality, and that consumers should continue to benefit from robust competition.
Historically, O2 previously sought a merger with Three in 2015, but that proposal was blocked by the European Commission on competition grounds.
Vodafone currently offers broadband services using BT Openreach’s wholesale connections. Because Vodafone relies on Openreach for fixed-line access, it has less direct control over the combined mobile and broadband customer experience than BT/EE or a merged Virgin-O2 operator would have.
Three stands out among major UK mobile operators as the only one without its own fibre broadband offering; it is focused on delivering home broadband over 5G. Three has secured spectrum assets that position it well for 5G-based broadband services and has promoted its network’s performance in early speed comparisons.
International standards bodies such as the ITU describe “true” 5G in terms of factors including available spectrum bandwidth. While industry debate continues, Three is the only UK operator that meets the ITU’s 100MHz spectrum benchmark in all its key bands and has used this to claim leadership in delivering 5G services. Though the UK rollout of 5G is still at an early stage, independent speed testing has placed Three’s 5G among the fastest in some measures.
Mann added that the merger could trigger further consolidation or deal-making across the UK market — potentially involving players such as Vodafone, Three, and Sky — though any future combinations would still face regulatory scrutiny.
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